Future TV Skepticism: Why I Don’t Think Apple will Conquer TV

It’s been a crazy week of reports on TV. It started with the extremists predicting nothing less than complete destruction of TV. They report this, of course, with tremendous glee – after all it’s good for your career to predict the demise of TV.

On the other hand, we’ve been fortunate to read responses from savvy TV watchers who observe TV with more clarity and better awareness of history. In particular, check out this post by Wayne Friedman of Media Post. (Link Here.) And I highly suggest you read this one about why internet HBO would cost far more than cable HBO cable – far more than anyone would pay. (Link Here.)
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Cable Cutting & Self Righteous Attacks on TV

I get pretty miffed when the “cable cutter” enthusiasts try to argue that online video will drag society out of the depths of depravity found in TV programming.

After all, what are most teens watching online? You can bet it’s NOT Masterpiece Theater or Nature. More likely they’re watching video’s of guys becoming eunuch’s when skateboard tricks land them on handrails.

This attack in TV is nothing new. I remember making it a few times in youthful enthusiasm while in college. Still, proponents of new media too often sound like sci-fi books — promising a “glorious future” where the internet changes mankind. (They are, of course, merely the latest to claim to remake humanity in thousands of years of such movements.) Read more of this post

Research Proves Netflix is the Internet Hawg. What Will the Angry Birds Do?

A recent report looks at all Internet bandwidth (upstream and downstream) and concludes that Netflix is now the single biggest consumer of bandwidth. (Report here.)

And so it begins.

What begins? That’s the big question. Fundamentally, the Internet universe we have come to know and love is threatened by the onslaught of movies online.

For example, in my neighborhood we can tell when our neighbors start watching movies – because our bandwidth slows down dramatically. And, talking with folks, it’s a pretty universal experience to lose Internet speed on Friday afternoon/evenings as well as weekend evenings.

Does this mean an apocalyptic Internet disaster? Probably not. But it looks like Netflix has stolen the internet eggs that we’d like to use for other things. And, from what I can see, the consumer, the movie business and the Internet business are all unprepared for the havoc Netflix is wreaking.

Netflix’s Loophole. I’m told that Netflix dominance is made possible in large part by a short term loophole. Right now, high speed Internet relies heavily on past investment in infrastructure that contributed to the dot com crash, then was bought for a song and expanded in the past decade. My guess is that this means that the current equation (you get all the movies you want to watch for under $10) isn’t likely to last.

So Netflix is using a type of bait and switch tactic: hook us with low prices and it sure looks like they’ll have to switch to high fees later. All this made possible because they don’t have to pay for the bandwidth they’re using today. The result will be that we end up paying more for Internet delivered entertainment than we ever have for cable.

There is an alternative outcome. Comcast (and other cable operators) seem to be the Timex watches of the entertainment business. Nothing exciting. Nothing particularly motivating. But they take a licking and keep on ticking. So in truth, Comcast may dominate and Netflix could be forced out of the picture.

I never believe companies who claim they have suspended fundamental economic truths. And Netflix’s statements about bandwidth lack economic truth. Fortunately we were reminded recently that economic laws can’t be broken when Blippy had to return to a sane business model.

So let’s hope that sanity comes back to the discussion of TV over Internet. Because right now it’s stuck in an imaginary economic universe where bandwidth performance is free.

And lets hope some of those angry birds get their eggs back so we don’t move back in time and end up with the neighborhood equivalent of dial-up because the Hawg stole the bandwidth.

Copyright 2011 – Doug Garnett – All Rights Reserved

Do Superbowl Ratings Identify Flaws in Online TV Theory?

Overnight ratings for the Superbowl are in – and they’re outstanding. (Click Here.)

Of course, this suggests that when internet TV enthusiasts tell us about huge groups of people “cutting the cable” they’re really trying to cash in their venture investments. Because there are apparently enough cables still connected that the 2011 Superbowl had more viewers than any TV show in history (111 million of them) AND appears to have had a 71% share – watched by over 2/3rds of all televisions turned on at the time.

Let’s use this as a starting point to think a bit more about what Connected TV theorists are claiming right now – namely that we can throw out existing TV with its cable pipeline. (NOTE: A comment from Peter reminded me that this Superbowl was available without cable on Fox network affiliate broadcast feeds. Correction appreciated. And I don’t think this fundamentally changes much. Those feeds are a by product (today) of the strong cable distribution in the US. Change that cable distribution and the economic support for sports broadcasting changes.)

Mass Market or Fragmentation?

As I noted in a recent post, the internet is a tremendous tool to reach tiny shards of audiences. Because online, people scatter to the ends of the web.

But the Superbowl showcases TV’s ability to reach the masses quickly. In fact, TV drives mass communication – the web doesn’t. The web’s inherent strength is fragmented communication.

Note that for all the claims that Facebook and Twitter drove awareness of the recent Egyptian demonstrators, it took 24 hour coverage on the TV networks as well as newspaper front pages to generate broad awareness. (Note that TV coverage of Egyptian demonstrations has given CNN it’s highest ratings in years.)

If All TV Arrived Via Internet, Would There Be a Performance Issue?

These Superbowl numbers also make me wonder if scattering on the web isn’t critical to good web performance. We know the web breaks down under high use. For example, yesterday I attempted to look up some information from Fergie’s online bio’s during the halftime performance. What % of the TV audience was I competing with? .05%? But EVERY site had crawled to a stop.

Would there be a performance issue trying to broadcast the Superbowl ONLY over the web? I’m not a tech guru enough to know. But, here’s the problem: When 50 million US households want the same HDTV programming at the same time, the cable pipe seems to be a much more convenient distribution mechanism than the internet.

There are clever staging, cacheing, and other network load management things that can be done for a predictable event to attempt to maintain performance for something predictable like a Superbowl. Maybe they’re enough. But what about when an unexpected event like 9/11 happens (god forbid it happens again)? Would we be able to get good coverage? News sites already slow down when a gas main explodes in New York.

Sports Are Critical to Americans

Sports are a good place to consider this issue because technologies can be made to live by offering new sports options (DirecTV). Or they will die without it (we’ve forgotten the names of all those interactive TV efforts that were meaningless).

American’s won’t put up with a Superbowl where the action looks and feels like a satellite report from Afghanistan. Sure hope someone’s got this figured out before VC money pays to mount the effort to destroy cable TV.

Copyright 2011 – Doug Garnett

Is there a Consumer Downside to Internet & TV Convergence?

While there is some superb “envisioning of the future” in the tech business, all too often discussions of future products are delivered with a sci-fi like naivete and a misplaced utopianism. 

Now I’m an advocate for TV/Internet convergence. But I’m also quite concerned by the dominance of this naivete in today’s discussions about convergence. And one strange area of utopian ideas surround claims that eliminating advertising in TV programming is a value to consumers. 

Supporters of this idea point to survey claims that consumers don’t like TV advertising. But surveys of this type have been around for 50 years, always said the same thing, and always been notoriously inaccurate. And we rarely hear about the contrarian research like last year’s study suggesting consumers enjoy programming more when it includes advertising (“Enhancing the Television-Viewing Experience through Commercial Interruptions”, Nelson/Meyvis/Galak, Journal of Consumer Research, August 2009 also summarized here).

Even worse, utopians seem to forget that consumers hate internet, mobile, or email advertising much more than they hate TV ads. Still, this thinking endures – even at many advertising agencies.

We should all be careful of what we wish for. Convergence could easily hurt consumers more than it helps them. Consider…

…Consumer experience of unwanted advertising on TV is quite minimal since DVRs make it easy to skip ads that aren’t valuable. Note that the latest research shows that DVR’s haven’t decreased ad effectiveness and may even have increased it since consumers can rewind DVRs to see the ad again.

…TV ads work exceptionally well. If everyone hates them, how can this be true? Maybe when you’re asked if you “like” ads, it’s socially unacceptable to say “yes”. And, maybe “liking” isn’t what’s important.

…TV ads deliver a value to consumers. Good ads deliver valuable information consumers can’t get anywhere else – and nothing’s better than TV at delivering this value. At the same time, these ads pay for the programming in a consumer win-win.

…Program developers, networks, cable systems, stations, and advertisers live in a delicately balanced “eco-system” that benefits the consumer. Evolutionary adjustments within this eco-system are the only approaches that have been profitable. Unfortunately, the rush to convergence may dive head-first into revolutionary change that hurts consumers. 

Discussing these truths may be a fools errand. Few people, even those in advertising, have the courage to observe that advertising brings consumers value. As a result, many advertising agencies are actively colluding with new media companies, tech developers, and investors in an attack on television.

There is significant value to deliver with convergence. But we must not let utopianism lead us to destroy what’s good in the TV ecosystem. Are we so naive that we ignore the risk that convergence could end up delivering only a bit more programming while increasing costs and slowing down internet performance?

Copyright 2010 – Doug Garnett

Even Google Can’t Seem to Explain GoogleTV

It’s not a good sign when the company inventing an “exciting new product” releases video after video quite visibly searching for a way to explain why we should care about their product.

Yesterday, quite soon after the initial announcement, Google released a new video trying to explain the consumer value of GoogleTV.

I criticized their initial announcement because they didn’t reveal much consumer value from GoogleTV – certainly not enough value to spend $400 on a set top box or over $1K on a new TV.

So, I thought maybe they’d figured it out now and we’d see it in the new video. But this video doesn’t help. This video makes GoogleTV look to be little more than an enhanced DVR cross-bred with WebTV. Adding a nice ability to customize menu’s and access to YouTube. But little else.

Worse, the video isn’t clear about fundamentals: do I still get all my programming through the cable pipeline? Google drops a quick aside saying GoogleTV has “everything you get today”. But this deserves detailed attention because internet bandwidth isn’t capable of delivering today all the TV viewing through the internet connection for the mass market.

The video is also quite cluttered with very fast perusing of confusing looking lists. Probably Google trying to minimize the complexity we’d face trying to search for programming using the internet.

The video does hint at a possible pool of tremendous value: Droid Apps. But, they drop the hint and don’t follow it up. Perhaps they don’t know how to improve the TV viewing experience themselves, so they’re hoping that App developers will figure it out for them. But this could be the hail mary pass of technology announcements. (We used to call it VaporWare. As in, “It’s not quite what you want today. But our App developers will make it better. Trust us.”)

So in the end, this video is only marginally more useful than the truly silly ones they released on announcement day. And, I continue to wonder if Google has a solid vision for GoogleTV or just a desperate desire to get ad revenues from the TV pool.

Copyright 2010 – Doug Garnett

What We Learn Outside the Internet & TV Convergence Bubble

Today every new technology is accompanied by an information bubble – built by marketers, consultants, and investors. The bubbles reflect group think that might drive success. But all too often, firms live inside the bubble in blissful ignorance of market truth.

And inside the Convergence bubble is a deceptive logic that says: If people have trouble finding TV shows they want to watch, then more TV channels are the solution.

This logic leads companies to seek VC dollars since the web can offer billions of viewing options (i.e. Channels). And hence, the bubble decides that merging the web and TV will solve all our “what to watch” problems.

Seems obvious. So what’s the problem? Only that’s the first statement is wrong.

I did consumer research work in the 1990’s on TV network expansion. At the time, we presented consumers the opportunity to solve their “what to watch” problems by shifting from 75 to 250 channels. You know what we heard? Consumers were savvy enough to know that wouldn’t solve their problems. Here’s what I’ve come to understand.

A given consumer partakes of only a small portion of today’s programming – not because they can’t find it. But because their mental “consideration set” can’t hold more clutter.

The consideration set for most people seems to include a few groups of stations or networks. Sports networks are one group and news networks another. And each group tends to include a small set of networks.

These consideration sets shrink when we look at programming. Most individuals have only a small set of favorite programs at any time. Fortunately, DVRs have made it possible to time shift anyone’s favorite programs to the times they want to (or are able to) watch.

Somehow, there are many startups that wish people shouldn’t work this way. But I think it’s simply human that our brains are limited in our ability to hold large numbers of options and effectively choose from among them.

So despite grumbling, the vast majority of consumers are quite satisfied with TV today. And a simple set of things would thrill them for years to come:

1. The current set of channels with good DVR access (or unlimited “on demand”).
2. Access to movies without DVDs. Streaming or through advance downloads.
3. Access to web video like YouTube on the TV. (Although most consumers aren’t likely to spend more than 5% of their viewing time on web videos.)

This doesn’t mean there couldn’t be some exciting new things discovered. But if past experience is an indicator, the winning convergence company will be the one who steps outside the bubble and makes a simple product that delivers good consumer value. And it will be the one who doesn’t try to do it all at once.

Some tech companies will be put off because delivering this doesn’t require sexy new technology (sadly, it’s harder to raise money for real consumer solutions than for un-needed technology that’s new and sexy).

But Apple’s 2 million iPads in 2 months should teach us a lesson. Pundits were critical that the iPad wasn’t sexy technology. Two million units later, who cares? Consumers don’t.

Copyright 2010 – Doug Garnett

The Sound & Fury of GoogleTV

Last Thursday Google TV was announced. I’d hoped for something good. The intersection of TV and the internet could create a fantastic viewer experience.

Sadly, the combined power of Google, Sony, and Intel (with bit parts for Logitech and Dish Network) will apparently deliver not much more than a better program guide.

That’s right. Google’s release material put quite an emphasis behind the idea that today’s TV program listings are too complicated. Then they promise Google TV will fix this tiny problem by creating a much bigger one: finding programs by searching the internet.

(I’m a better than average Internet searcher. But online search usually means wading through meaningless interfering hoo-hah to find what I really want. It’s hard to be excited about finding TV programs this way.)

YOUTUBE ON YOUR TV
Google does suggest some decent value in big screen access to YouTube, Hulu and other online video sources. This is an area of good interest. At the same time, my instincts are uneasy. Will consumers find it worth dropping $1000+ in equipment just for this? I just don’t know.

Apple might know this from their TV efforts. It is possible that real life usage of online video on a TV is insignificant. After all, the best programming is still on traditional TV where it is likely to remain for a very long time.

And that makes it concerning that there weren’t any network execs present – not even the barest rumor of network involvement. Traditional television is still the best, and perhaps the only, way to move the masses.

A DESPERATE SEARCH FOR AD REVENUE
The way I make sense of this announcement is to remember that Google desperately needs ad revenue growth. They own YouTube which is still searching for economic viability so perhaps they hope to take that from existing TV spending. And, they’ve been trying for several years to tap TVs dollars with an AdWords like scheme to sell TV. (It hasn’t worked.)

In truth, there’s a tremendous pitch to advertisers about the opportunity to deliver targeted TV ads on Google TV. But Google didn’t make that pitch last week. Probably because it will only become meaningful if consumers buy these TV’s.

For now, I see an attempt to use square technology to tap into a round ad revenue opportunity. But that’s just this announcement. Maybe Google has a deeper vision we don’t yet understand. Maybe the underlying Android system will let others do what Google didn’t. For Googles sake let’s hope so. Stay tuned…

Copyright 2010 – Doug Garnett